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Atrium Mortgage Investment Corp. Q1-2020 Earnings, Price Target Update

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Atrium Mortgage Investment Corp.(AI-TSX), is a mortgage investment corporation (MIC) managed by Canadian Mortgage Capital Corporation (CMCC). CMCC is a major mortgage brokerage and advisory services company with established mortgage servicing operations based in Toronto. The company acts as a mortgage broker for institutional quality mortgages. CMCC is also the manager of the DREAM CMCC Capital Fund which invests primarily in residential developments and mezzanine financing opportunities in Ontario and Western Canada. The Fund was established and sponsored by Dream Real Estate Asset Management (previously Dundee) and CMCC. CMCC as manager is responsible for originating, underwriting, servicing and syndicating Atrium's mortgage loans. CMCC has been in the business of originating and underwriting mortgage loans for 20 years and servicing mortgage loans for 15 years. Atrium is a niche mortgage lender with a strategy to lend short-term, with loans secured by real estate located in major urban centres. They focus on short term commercial and residential project loans that would otherwise be placed with financial institutions. Their lending focus is in Ontario, mainly the GTA and BC, the average loan term is less than 2 years.

Atrium's policy is the average loan-to-value ratio of the mortgage portfolio, at the time of underwriting each loan, will not exceed 75%. A typical loan in the portfolio has an interest rate of 7.75% to 10% per annum, a one or two-year term and monthly interest-only mortgage payments. Lending parameters are as follows: mortgages on residential and commercial properties up to a maximum of 75% of appraised value; loans on single family residences up to 75% of appraised value; mortgages on income-producing real estate up to a maximum of 85% of appraised value; construction loans up to a maximum of 90% of cost. Mortgage loan amounts are generally $300,000 to $30M. The largest single mortgage in the mortgage portfolio as at Mar-31-2020 was $43M. For loan amounts in excess of $30M, they generally co-lend with a financial institution or private lender.

Atrium is a Mortgage Investment Corporation (MIC) as defined in the Income Tax Act. Accordingly, Atrium is not taxed on income provided that its taxable income is paid to its shareholders in the form of dividends within 90 days after December 31 each year. Such dividends are generally treated by shareholders as interest income; so that each shareholder is in the same position as if the mortgage investments made by the company had been made directly by the shareholder.

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